The Federal Government has ended its seven years’ default of the Pension Reform Act (PRA) 2004. Omobola Tolu-Kusimo writes on how feat the National Pension Commission (PenCom) achieved this feat.
The Federal Government is leading by example on compliance with the pension. How? President Muhammadu Buhari has approved the payment of outstanding pension liabilities under the Contributory Pension Scheme (CPS).
The major objective of the pension reforms carried out in 2004 is to ensure that every worker in either the public service (of the federation, the public service of the Federal Capital Territory (FCT), states and local governments) or the private sector receives his retirement benefits timeously.
Enforcement by the National Pension Commission (PenCom) started with pensions being paid promptly until 2014 when it suffered setbacks on pensions of Federal Government’s retirees and their next-of-kin. They were no longer paid on time, with about two years’ backlog in payments.
There were defaults on Section 4 (1) of the PRA 2014, which increased pension contribution from 15 per cent to 18 per cent.
Many employers in the private sector were also defaulting as they were not remitting 18 per cent and in some cases not remitting at all, thereby delaying pension payment of their employees.
But the good news from President Buhari last week was that it is ready to fully implement the provisions of PRA 2014, to turnaround the fortunes of employees, retirees and pension operators.
The regulator is also relieved as employees and retirees have held the commission responsible for the setback suffered in the industry.
Suffice to state that part of what the commission is yet to achieve is Section 89(2) which grants employee’s permission to use a percentage of the balance in their Retirement Savings Account (RSA) for residential mortgage; Section 173(3) of the constitution , which states that pensions shall be reviewed every five years or together with any federal civil service salary reviews.
PenCom Director-General, Mrs. Aisha Dahir-Umar said: “President Muhammadu Buhari has approved PenCom’s submission on the payment of some critical aspects of the outstanding pension liabilities of the Federal Government under the CPS.
“Specifically, the President has approved payment of outstanding accrued pension rights for verified and enrolled retirees of treasury-funded MDAs that retired, but are yet to be paid their retirement benefits, as well as the backlog of death benefits claims due to beneficiaries of deceased employees of treasury funded MDAs; payment of 2.5 per cent differential in the rate of employer pension contribution for Federal Government’s retirees and employees which resulted from the increase in the minimum pension contribution for employers from 7.5 per cent to 10 per cent in line with Section 4(1) of the PRA 2014. Payments for retirees and employees would take effect from July 2014.
“It is worthy to note that, subsequently, the Federal Government is expected to continue with the payment of the 10 per cent rate of employer pension contribution for its employees, thus ensuring a remittance of at least 18 per cent monthly (employer 10 per cent and employee eight per cent) as provided by the PRA 2014. Funds have already been made available for the settlement of the above stated pension liabilities. Accordingly, remittance into the various Retirement Savings Accounts (RSAs) of the affected retirees and employees is currently being processed. The affected retirees and employees would be notified in due course by their Pension Fund Administrators (PFAs).
She continued: “The settlement of the outstanding accrued pension rights of verified and enrolled Federal Government’s retirees and compliance with the reviewed rate of pension contributions are significant developments, that have resolved the challenges in these aspects that have lingered since 2014.
“Finally, the Board and Management of the Commission reiterates their appreciation to Mr. President for his untiring support and commitment to the implementation of the Contributory Pension Scheme and ensuring the welfare of retirees.”
The Director, Centre for Pension Rights Advocacy (CPRA), Ivor Takor, said it is clear that the Federal Government is ready to fully implement provisions of the Pension Reform Act.
The expert stated that 16 years after the Act came into force of the CPS, landmark achievements had been recorded.
He said: “After implementing the scheme for 10 years, the PRA 2004, which introduced the scheme, was reviewed to take on board desirable changes aimed at taking the scheme to the next level.The outcome of the review was the enactment of the Pension Reform Act (PRA) 2014. The Act brought on board some changes into the supervision and administration of the scheme, including increases in the rates of contributions of the employer and employee. Another introduction was the permission of the use of a percentage of the balance in an employee’s Retirement Savings Account (RSA) for residential mortgage.”
Takor added: “The CPS, which is mandatory for employees in the public service and employees of private sector organisations with more than three employees, left the majority of employees in the unorganised private sector and the self-employed with no financial protection in their old age.To expand the coverage of the CPS, to these segments of the citizenry, PenCom, introduced the Micro Pension Plan within the framework of the CPS.The Plan allows citizens who fall within the bracket earlier mentioned, to make financial contributions towards the provision of pension at retirement or incapacitation on health grounds.
“In line with Section 13 of PRA 2014, PenCom, on Monday, November 16, 2020 launched the Transfer Window, which allowed RSA holders to transfer their accounts from one Pension Fund Administrator (PFA) to another once in a year. The growing size of pension assets is impacting positively on the financial landscape of the nation, with a growing role as institutional investors, being played by PFAs and life insurance companies, indicative of the positive impact the CPS is having on the economic growth of the nation. PenCom, Pension Fund Administrators (PFAs) and Pension Fund Custodians (PFCs) as well as life insurance companies combined; employ thousands of graduates and experts in diverse fields, thereby contributing to solving the hydra-headed monster of unemployment that the nation is facing. From a non-existing industry in 2004, the CPS has evolved the pension industry, which is fast becoming a power base in the financial sector of the economy.
“Unfortunately, while the CPS is impacting positively on the nation, the hens that are laying the golden egg, retirees of federal public service, are leaving in abject poverty and penury as a result of the non-payment of their retirement benefits. It is, therefore, heart-warming, and worthy of mentioning, that the Federal Government has revealed that it is ready to fully implement the provisions of PRA 2014.”
He commended the President for the approvals and urged him and his officials to sustain the policy direction.
“We are drawing the attention of the President and his officials to Section 173(3) of the constitution, which states that pensions shall be reviewed every five years or together with any federal civil service salary reviews, whichever is earlier. We point this out knowing that the review is a constitutional matter and this government respects and upholds the provisions of the constitution.
“We, at the Centre for Pension Rights Advocacy, join workers and pensioners to appreciate the Board and Management of PenCom for leaving up to its responsibility of effective supervision and regulation of the industry. We are aware of the progress being made by PenCom to ensure compliance in the private sector. We are not unaware of the huge challenge PenCom has to go through to effect compliance in the public sector, being an agency of the Federal Government.
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